South Carolina’s retirement fund is worth about $1 billion less than it was this time last year, according to a preliminary financial report.
The fund – which pays the retirement benefits for about 110,000 retired S.C. public-sector workers – made money on its investments. But the 0.6 percent return, or about $87 million, was well below the fund’s goal of a 7.5 percent return and was not enough to cover the fund’s expenses.
“It’s part of the normal fluctuation of the markets,” said Reynolds Williams, chairman of the S.C. Retirement System Investment Commission, which oversees the fund. “Obviously, we’d rather make a lot of money every year. But that doesn’t happen in the real world.”
The retirement fund has three ways to make money: employee contributions, taxpayer contributions and investments. The fund pays about $1 billion a year more in benefits than it receives in employee and taxpayer contributions. But, usually, profits on the fund’s investments make up the difference.
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For example, in the previous fiscal year, the fund made about $4 billion from its investments.
But profits for the fiscal year that ended June 30 were not as high, and the fund saw its value shrink by $959 million to $25.3 billion, according to the preliminary report.
The numbers were made public as the Investment Commission met Thursday to decide how much to pay Hershel Harper, its new chief investment officer.
Harper’s predecessor, Bob Borden, made $485,000 – not including incentives – making him one of the state’s highest paid employees. However, Borden had two jobs: chief investment officer and director of operations.
The commission since has decided to separate those responsibilities. It is in the process of hiring a director of operations.
After meeting behind closed doors for about 90 minutes Thursday, the commission’s compensation subcommittee agreed on a salary for Harper, but officials would not say how much that salary is. Travis Pritchett, the subcommittee’s chairman, said the offer is only the first step in a salary negotiation with Harper.
While the fund is spending about $1 billion more on retirement benefits than it receives in contributions each year, those numbers soon will change.
In June, lawmakers passed and Gov. Nikki Haley signed a new law that likely will result in state workers working longer before they retire. It also will require current state workers to pay more into the retirement fund.
The law is projected to cut $2 billion from the retirement fund’s $15 billion shortfall in its first year.
The state’s retirement money is invested in many investment vehicles, and the state usually pays outside firms to manage that money. Last year, the commission paid $349 million in management fees, a figure that state Treasurer Curtis Loftis has criticized as too high.
This past fiscal year, however, the state began managing some of the investments itself, saving about $5.5 million in fees. It also moved about $1 billion in hedge funds, saving about $8.4 million in fees.
It was a tough year for public pension plans across the country. Plans in Florida, New Hampshire, Connecticut and Nevada saw their investment returns fall well below their goals.
In South Carolina, it was the third straight year the investments made money since a disastrous 2009, when income from the pension fund’s investments was down about $5 billion. Since July 1, 2005, the total investment income for South Carolina’s retirement fund is $6.2 billion.